what is different in the cashflows for synthetic and cash CDO's
Posted: January 22nd, 2006, 2:49 pm
Hi,I understand that cashflows for cash CDO's are:for a given tranche ---1. PV(Losses): PV(1-R) if there is a default. 2. PV(Periodic payments): PV(Reduced notional) * Tranche_coupon ... until the notional is reduced to 0.and then we run the simulation over and over and the difference of the two is the price of the CDO.NOW what is different in a synthetic CDO?? What changes when the underlying is a CDS?THanks much